Investment Mantra

24/07/2022

Commodity Future Trade Ban: Curse or Boon on Agrarian Society
It is now more than seven months that NCDEX Futures trade in 7 commodities is serving
ban after market regulator SEBI on 20th December 2021 denied Future Trade in below
mentioned commodities and subsequently NCDEX in it’s circular vide dated 20th
December 2021 acted in compliance:

S. No. Commodity Name Symbol
01 Wheat WHEATFAQ
02 Chana* CHANA
03 Rapeseed – Mustard Seed* RMSEED
04 Soybean SYBEANIDR
05 Refined Soy Oil SYOREF
06 Hipro Soybean Meal SBMEALIDR
07 Crude Palm Oil CPO
08 Moong MOONG
09 NCDEX Soydex SOYDEX
*These actions have already been implemented in the said commodities vide Exchange
circulars no. NCDEX/SURVEILLANCE & INVESTIGATION-049/2021 dated August 16, 2021,
and NCDEX/SURVEILLANCE & INVESTIGATION- 082/2021 dated October 08, 2021

The market sentiments were jolted by decision and many small agri traders, farmers and
other participants lost the opportunity to hedge against the price risk which is inherit in
commodities due to multiple factors like supply chain, seasonality, demand & supply,
production, international trade, geo-political conditions etc.

Though regulator didn’t mention any reason for ban, but it was considered that obvious
reason to ban the Future Trade was to curb food inflation in the country which was at
5.2% as measured by Consumer Price Index-Combined (CPI-C) in 2021-22 (April-December),
says the Economic Survey 2021-22. However, it was observed that prices of some
perishable commodities like onion and tomato were skyrocketed in FY 2019-20 and
consumers burnt holes in their pockets to afford consumption of this essential
commodities in kitchen.

The bigger question which remained unanswered, is ban on Futures Tarde in above
mentioned commodities have showered boon in agrarian community or society at large
because if price hike in agri commodities is due to Futures Trade then as per Nomura
report published recently stated the food inflation will average over 8 per cent year-on-
year in 2022 from 3.7% in 2021.

Thus, it can be inferred that ban in trade on Exchange haven’t provided any soothing pill
to the economy in restricting food inflation and rather it was witnessed that market
fundamentals played the vital role in making the commodities costlier to common man.
The export ban in wheat commodity by GOI on 13th May 2022 was classic case where
Future Trade didn’t contribute to price rise in wheat which made GOI to ban export on
wheat to manage the overall food security of the country and to support other
vulnerable countries amid Ukraine & Russia War.

Future Trade in India which is still considered at nascent stage and participation of agri
value chain participants is still not in encouraging numbers, ban on commodities and that
too in large number for such long period may hurt the sentiments of agrarian society and
rather there can be other check and balances which can be bring in force by regulator
like increasing margin, restriction on open interest for commodity derivatives, easing
import regulations, stock limit to increase supply in open market to keep check on
inflation.

The detrimental effect of ban in above commodities is now showing sign of concern in
the market where farmers, FPO and other participants are left with no option to hedge
the commodities on exchange which effect fair trade and participants are left at the
mercy of physical trade where chances of delivery default is always a risk.
Further, physical delivery of exchange traded commodities provide comfort to trade
participants for fair and time bound delivery of commodities as per exchange defined
specifications which act as assurance for market to take business decision in trade either
for export, domestic consumption, food processing etc.

It may also be noticed that, in absence of futures trade many companies engaged in
dealing of commodities resort to international exchanges to hedge their trade in Indian
market which takes away huge volume from Indian Exchanges with a point of no return
which hinder fair price discovery in Indian Market that aid in outlook on commodities.
Frequent bans on commodity derivatives contracts also hinder effort by exchanges to
develop the market ecosystem i.e., spot and futures trade prices dissemination to market
participants, development of storage capacities and assessment tools for fair assaying of
commodities and development of negotiable warehouse receipts as opportunity for
farmers and other participants to avoid distress sale.

It is now imperative that regulator revoke ban as soon as possible for market trade in agri
commodities to prosper and compete with international exchanges. Further delay will
only dent the confidence of agri community and will showcase negative narrative in
market and long journey of exchange in educating and training agrarian society to
participate in Future Trade may turn sour and dream of increasing the income of farmers,
FPO and other small market participants may be further stretched for long period.

Note: Views in above post are personal.

05/01/2022

https://www.fortuneindia.com/investing/term-insurance-price-rise-10-yr-delay-can-cost-78-more-premium/106599

As compared to Q1 2021, the average term insurance prices have risen by 9.75% in the term index value in the quarter under consideration.

18/01/2021

*IPO Update: IRFC*
IRFC, wholly-owned by the Government of India, is the dedicated market borrowing arm of the Indian Railways. Incorporated in 1986, it follows a financial leasing model to finance the acquisition of rolling stock assets, which includes locomotives, coaches, wagons, trucks, flats, electric multiple units, containers, cranes, trollies, etc.
IRFC is also into leasing railway infrastructure assets and national projects of the Government of India (project assets) and lending to other entities under the Ministry of Railways (MoR).

We find Price to Earning P/E valuation at 8 with P/B value at 1 which is available at very reasonable price band.
IRFC being a lending company for Railways will always enjoy the smooth business from Railway to source funds and lend further.
Between FY18 to FY20, its profits rose 34%, NII at 20%, PPOP at 19% and AUM at 32%.
We recommend to *SUBSCRIBE* for this IPO to carry stock for long term portfolio and may not provide lavish listing gains.

26/12/2020

Health insurance plans have become necessary in these uncertain times. As the pandemic is causing more and more hospitalisations, people are suffering financial losses. Moreover, with no end in sight for the pandemic, the demand for health insurance has increased in 2020. Despite the increased demand, health insurance premiums have seen a considerable spike in 2020 compared to 2019. Many policyholders have found their premiums increased by 30% to 40% upon renewals and, in some cases, the premium increase has also touched 100%. What are the possible reasons to blame for the surge in health insurance premiums? Let’s explore –

Increased claims due to COVID
Health insurance companies have been registering high claim volumes due to the pandemic. As of 30th October 2020, insurance companies recorded an aggregate claim bill of INR 7700 crores under their COVID health insurance policies as per data compiled by the General Insurance Council (GIC). The pandemic has also pushed the demand for health insurance policies by 15.8% by October 2020.

(Source: Indian Express)

Due to high claim volumes, health insurers are forced to increase their premium rates to ensure profitability and solvency.

High medical inflation
Medical inflation keeps on increasing year after year as the cost of medicine and treatments rise. According to the Economic Survey 2019, in financial year 2017-18, healthcare inflation was 4.39% which increased to 7.14% in 2018-19. Comparing these two financial years, inflation in hospital and nursing charges jumped to 9.4% in 2018-19 compared to 6.5% in 2017-18.
This rising inflation has caused health insurance companies to witness larger quantum of claims which, in turn, has increased the premium rates.

Wider coverage
IRDAI (Insurance Regulatory and Development Authority of India) issued mandates for health insurance companies to widen their scope of coverage. Illnesses and treatments like mental disorders, modern treatments, COVID-related treatments, etc. are now a common coverage benefit in health insurance plans. As the scope of the policies has widened, insurers are exposed to the probability of higher claims. Thus, to compensate for the wider coverage offered, insurers have hiked their premiums.

Increased risk of COVID for people with co-morbidities
Knowing that people having diabetes, hypertension or other co-morbidities are exposed to sever COVID-related complication, insurers face a higher risk. That is why premium hike has been focused more on policyholders with co-morbidities or for those who smoke as they face a higher health risk against COVID.

The concept of level premiums in age brackets
Many insurance companies charge similar premiums from individuals within a particular age bracket. This age bracket is usually for a period of 5 years, i.e. 25 to 30 years, 31 to 35 years, etc. So, if you are in one age bracket, your premium might not change for as long as you remain the same bracket. However, insurers might have to adjust their premiums depending on their claim experience and his adjustment is usually done when the age bracket changes. So, when you move to the next age bracket, the change in premium might be higher to account for the insurer’s claim experience.

While COVID has definitely impacted the premium rates of health insurance companies, the above-mentioned factors also have a bearing on the tremendous increase in the premium rates. So, the next time that you renew your health insurance plan and find an unusually high amount of premium being charged, know the reasons why the company is asking for a higher premium amount.

27/10/2020

Market Update:
Indian shares traded higher for the most part of the day, with the Nifty closing near the 11,900-mark on October 27 backed by banking & financials, auto, FMCG and pharma stocks.

The Nifty opened higher at 11,807.10 and gradually gained strength after an initial hour of volatility to hit the day's high of 11,899.05. The index climbed 121.60 points or 1.03 percent to close at 11,889.40.
The Bank Nifty managed to snap its losing streak of the last three trading sessions to give the highest daily close of 155 trading sessions.
The index closed 694.05 points, or 2.88 percent, higher at 24,769.50.
A decisive close above 12000 may push market to 12200 and thus opportunities to be used during any dip for accumulation of quality stocks in the portfolio.

17/10/2020

*Market Outlook*
Week that was…
Equity benchmarks took a breather during the week amid volatile global cues. The Nifty ended the week at 11762, down 1.3%. Sectorally, metal and realty stocks outshone while auto, pharma and PSU banks underperformed during the week.
1. In line with our view, profit booking emerged from the psychological mark of 12000, as profit booking observed in recently ran up stocks. As a result, index formed a small bear candle, indicating breather after past two weeks 1200-point sharp up move.
2. Going ahead, we expect index to consolidate in the broad range of 11500-12000 with a stock specific action amid progression of Q2FY21 result season. We expect strong buying demand to emerge in the vicinity of 11450-11550 and therefore any dip from hereon should not be construed as negative, instead it should be capitalised on as an incremental buying opportunity. Sectorally, the under owned cyclicals like metal and banking are expected to witness catch up activity while IT may take a breather after sharp up move. Meanwhile, 12000 would act as immediate resistance as during last week, on four occasions the index failed to surpass the psychological mark of 12000
3. The broader market indices have approached its maturity of price wise and time wise correction. Therefore, ongoing consolidation should be capitalized to accumulate quality midcap and small cap stocks in the portfolio. Since 2009, post a sharp up move (more than 25%) in the Nifty midcap and small cap indices, the intermediate average correction to the tune of 12-15% have offered an incremental buying opportunity. Whereas, time wise they undergo five to six weeks correction. In the current scenario, both indices have corrected 10% over past seven weeks.

19/08/2020

It was the range bound session on Dalal Street today with NIFTY opened at 11452 and managed to hold 11400 and closed at 11460.35 supported by Reliance Industries, telecom and Bankex and correction was observed in FMCG and technology stocks. Markets looks range bound in the range of 11200-11600 and it is advised to remain stock specific and select the stock with value in portfolio for deriving long term benefits. Apple Inc touched $2 trillion market capitalisation with announcement for 1:4 split of share three weeks back to remain affordable for retail investor raised confidence at Wall Street. High liquidity and lower interest rates accross the economy keeping the sentiments up on the index and investors can pick stocks with value and remain invested to reap benefits.

09/08/2020

Previous Week Highlights:
Output of eight core industries fell 15% in June 2020 (22% decline in May 2020) on account of Covid-19 related lockdown. Except for fertiliser production that grew 4.2% YoY in June 2020, all other sectors - coal (15.5%), crude oil (6%), natural gas (12%), refinery products (8.9%), steel (33.8%), cement (6.9%), and electricity (11%) recorded a decline in production. During April-June 2020, the sector’s output declined 24.6% YoY
The Ministry of Defence has released the draft defence production and export promotion policy (DPEPP 2020) with the stated objective of achieving a turnover of 175000 crore ($25 billion) including exports of 35000 crore ($5 bn) in aerospace and defence goods and services by 2025
RBI has announced a one-time restructuring plan for corporates as well as MSME, which was demanded by lenders. In addition, for the first time in recent history, restructuring has been announced for retail loans
According to media sources, the government's production linked incentives (PLI) schemes would help boost domestic mobile manufacturing by ~30% over the next five years to US$153 billion. The government is also aiming at ~40-50% growth in mobile phones exports for the next five years.
As per media sources, RBI's draft code on governance could extend the tenure of CEOs of private banks (for both promoters or professionals) to be capped at 15 years. RBI has also clarified that from the date of issuance of guidelines, promoters or CEOs who have completed 15 years would still have two years or up to the expiry of the current tenure to appoint a new successor
Brent Crude prices closed higher at US$ 44.8/barrel as compared to previous week's closing price of US$ 43.1/barrel. Gold prices ended higher at $ 2057/ounce as compared to previous week's closing price of $1965/ounce. Bond yields ended higher at 5.89% as compared to previous week’s closing price of 5.84%

30/07/2020

Weak global cues, accelerating coronavirus cases and July F&O expiry weighed on investor sentiment on July 30. The S&P BSE Sensex dropped 335 points to close at 37,736 while the Nifty50 slipped 100 points to end the day at 11,102.
The Nifty50, which opened at 11,254, rose toward 11,300 levels but then the bears took control and pushed the index below 11,100. The index finally closed at 11,102 down nearly 1 percent.Sectorally, action was seen in healthcare, IT, and realty stocks while profit-booking was visible in the public sector, oil & gas, and telecom. Investor to remain CAUTIOUS as market looks expensive and short term correction is all possiblity on account of weak GDP numbers in US, rising Covid 19 cases and uncertainty on banking moratorium defaults. Remaining stock specific is prudent and opportunity to gather quality stocks at attractive valuation shall not be missed in any correction.

24/07/2020

After opening lower at 11,149.95, the Nifty50 hit an intraday low of 11,090.30. The index managed to go past its previous closing of 11,215.45, hitting an intraday high of 11,225.40 in the last hour of trade but couldn't hold it. It ended at 11,194.20, down 21.30 points. The bulls seem to be tired after crossing the 11,200-mark and carrying the Nifty to a four-month high, as the index remained under pressure on July 24. Weakness in global stocks and selling in all sectors, barring IT, weighed on sentiment but the rally in Reliance Industries limited losses.Considering the sideways nature of the current phase, it will be prudent to remain neutral till a directional move emerges in the Nifty. The Bank Nifty traded lower after gap down opening at 22,853.20, and hit an intraday low of 22,417.20. The index closed sharply lower by 421.90 points or 1.83 percent at 22,662. It is advised to remain selective in stocks and utilize opportunity to accumulate stocks in dip which may bring good return in road to recovery of economy in medium to long term.

22/07/2020

The D-Street snapped its five-day winning streak as both Sensex and Nifty closed marginally in the red. The Sensex recovered over 250 points from the lows while the Nifty50 bounced back from 11,050 levels.
Let's look at the final tally on D-Street – the S&P BSE Sensex was down 58 points to 37,871 while the Nifty50 fell 29 points to 11,132. Indian indices exhibited volatility and closed in the negative, in sync with negative global cues. The spike in US-Chine tensions hit the global markets while a surge in virus infections globally also impacted sentiment.Domestically, the private banking space gained on the back of earnings numbers from Axis Bank. However, Auto, IT and PSU Banks led the losses. Sectorally, the action was seen in consumer durables, power, energy, banks, and telecom stocks while the selling pressure was seen in IT, Auto, capital goods, and realty stocks. We recommend to avoid long position as markets look choppy and further sticking to stable stock seems to be a good bet.